General News

Feb 18 2021

Blockchain Platform Qtum Teams Up with Blockpass to Provide On-Chain KYC Services

Blockchain platforms Qtum and Blockpass have teamed up in order to deliver on-chain (or blockchain-based) Know-Your-Customer (KYC) services.

As part of the agreement, Qtum will be providing subsidies to “specific” members looking to achieve regulatory compliance through Blockpass’s On-chain KYC solutions.

Adam Vaziri, CEO at Blockpass, stated:

“We’ve known and been fans of the Qtum team and network for a long time, and it’s great to have the opportunity to work closely with them. The Qtum network is innovative, and we’re excited to be able to bring the benefits and possibilities of On-chain KYC to developers and users alike. Facilitating fast, simple and efficient regulatory compliance on Qtum creates more opportunities for everyone, and spreads the phenomenon of On-chain KYC to an even wider audience.”

Qtum Co-founder Jordan Earls noted that on-chain KYC will become a vital component for many different protocols on the decentralized web or Web 3.0. He added that instead of hindering or inhibiting innovators who are focused on complying with regulations while enabling new technologies, the Qtum Foundation would “like to support those builders by backing Blockpass’ expansion to the Qtum blockchain.”

Earls added:

“Blockpass’ solution has exceeded our expectations when it comes to cost, which is an order of magnitude cheaper than traditional services, and its ability to only allow non-sensitive pieces of information to touch the blockchain.”

Qtum is an open-source, public (or permissionless) blockchain or distributed ledger technology (DLT) platform that aims to leverage the security of unspent transaction outputs (UTXOs) along with Ethereum Virtual Machine (EVM) smart contracts.

Secured by a proof-of-stake consensus mechanism, Qtum has introduced its own Decentralized Governance Protocol (DGP) that allows specific blockchain or DLT settings to be modified, “leading to the possibility of increasing Qtum’s block size without the need for a hard fork” or backwards incompatible upgrade.

Blockpass is a digital identity verification provider that aims to offer a “one-click” compliance gateway to financial services and other regulated sectors. Through the Blockpass platform, users are able to create, store, and manage a “data-secure” digital identity that may be used for a complete ecosystem of services, token purchases and to also gain access to “regulated industries.”

Blockpass is reportedly offering a 90% discount on its services in order to support clients during the COVID-19 pandemic.

Blockpass, which claims to be a pioneer of On-chain KYC, is a “fast, comprehensive” KYC and AML screening software-as-a-service for blockchains, crypto, DeFi and other regulated sectors. The platform offers various compliance benefits such as “pay-as-you-go,” no setup costs, no integration required, free-of-cost testing, and “immediate launch” services.

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Feb 16 2021

GameStop and DeFi: Let’s Not Be So Quick To Judge

Fellow DeFi adherents, let’s slow down on the outrage about GameStop (NYSE:GME) and the traditional finance system (TradFi).

Blockchain and DeFi offer lots of advantages over TradFi, but TradFi is not completely broken and DeFi is not necessarily vastly superior. Two core characteristics make them look very similar in a way that undercuts the criticism and negative judgments against TradFi.

First, DeFi and TradFi both require collateralization, they just implement it in different ways.

Second, just like collateralization can break down in TradFi, DeFi has a significant exploit that lessens the effectiveness of the collateralization requirement. And away we go!

Short selling has been much debated and criticized in DeFi and blockchain circles in light of the short positions and short squeeze on GME. All of the points raised by DeFi maximalists are well-founded but are also well-known in TradFi circles, having been the subject of discussion and regulation for decades. The Securities and Exchange Commission has strict rules on the subject, and market practice not only seeks to enforce those rules but has its own requirements that go further.

The biggest way that the rules and market practice seek to rein in illegal short-selling (including “naked” shorting) is through collateralization. Every borrowing of stock must be collateralized and that collateral is subject to loss if the borrow is not returned. That is, the borrower posts collateral in order to receive the stock to sell short, and the lender keeps the collateral if the borrower does not return the stock upon demand. Moreover, the amount of collateral required is marked to market every night, so the borrower is constantly posting additional collateral as the stock price rises. A short squeeze would not be possible without the collateralization requirement and nightly mark to market. They are why it can become prohibitively expensive to maintain a short position.

On the DeFi side, lots of commentators pretend that everything is free and easy. In reality, DeFi relies on collateralization, including versions of a mark to market requirements.

Maybe we can pretend it is different because DeFi often doesn’t use the term “collateralization,” preferring the term “locking” since the smart contract takes the relevant assets and holds (“locks”) them until the relevant activity is complete. The smart contract refuses to release the assets unless it is certain that the correct, countervailing value has been credited.

This locking mechanism is the reason that the concept of “total value locked” makes sense as one measure of the success of DeFi.

Without locking assets, nothing in DeFi works: not DeFi lending, where assets are locked before the loan is made; not automated market making, where the smart contract locks up amounts of each of the pair of assets being traded; not wrapped BTC, which locks Bitcoin in a smart contract before issuing the token representing that Bitcoin; not even trading on a DEx, where the smart contract locks up the tokens being bought and sold before doing an atomic swap or other exchange between accounts.

We who espouse the benefits of DeFi on blockchain and criticize TradFi need to recognize this parallel. We need to explain how collateralization in DeFi is better because it is instantaneous and controlled by smart contracts rather than left to manual processes where errors (including failures to post collateral or mark-to-market) are more possible. We also need to remind ourselves that a badly programmed smart contract can be just as error prone as manual processes, and with potentially irreversible consequences.

We also should jump down from the high horse of criticizing TradFi for the fact that short interest can exceed total float (that is, there can be more GME sold short than there are GME shares in existence). DeFi’s Achilles heel is yield farming.

It is tough to criticize GME’s massive short interest where, for example, your Dai locked at yEarn becomes yDai that you take to Aave to receive aDai that you take to Uniswap to receive its liquidity tokens that you take to another DeFi protocol and so on, earning yield at each step but locking up no new collateral. This daisy chain all rolls back to the same original locked assets, such that if something happens anywhere along the string, the consequences could be significant. As such, the chain of assets created in DeFi is parallel to the outsized short interest people are complaining about in TradFi when that daisy chain is not nearly as strong as the blockchain on which it is built.

Nothing in this article is intended to express a view on whether TradFi stock shorting, DeFi daisy chains, or the collateralization practices and methodologies in each, are good or bad, compliant or non-compliant, or even sensible. The point is that all of these things exist and everyone should study the parallels before launching their criticisms and especially before participating in the different markets.

Remember, one definition of DeFi is the use of smart contracts on decentralized blockchains to duplicate the products and services of TradFi. Perhaps that includes some of TradFi’s more challenging features as well.

Lee A. Schneider is General Counsel at Block.one, one of the world’s largest blockchain companies and creator of the EOSIO blockchain protocol. In that role, Schneider is responsible for various aspects of the legal function as well as the company’s government affairs initiatives. He joined Block.one after leading the blockchain, Fintech, and broker-dealer practices at two major international firms. Lee has been recognized as one of the leading voices in blockchain-related regulation and compliance and has played a role in structuring several of the largest and most successful blockchain-related projects. Schneider co-hosts the Appetite for Disruption podcast with Troy Paredes and is the contributing editor for the Chambers and Partners Fintech Practice Guide. He is the contributing editor of the Chambers and Partners 2019 Fintech Practice Guide. All views expressed are in his personal capacity and reflect only his personal views and not those of Troy, Chambers, or block.one or its directors, officers or employees. His views do not constitute legal, investment or any other type of advice.

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Feb 11 2021

Personal Finance Survey Reveals that 67% of Individuals Trust Robots More than Humans to Manage their Investments

We’ve been trusting robots to manage money more than we “trust” ourselves, according to a recent study from Oracle and personal finance specialist Farnoosh Torabi. The global survey of over 9,000 individuals across 14 different countries revealed that the COVID-19 pandemic has “increased finance-related stress at home and in business, and people around the world are looking to AI for help.”

The Oracle study found that financial anxiety and sadness among individual consumers and business owners or leaders “more than doubled (increased by 103%) in 2020.” Notably, the study revealed that 67% of people “trust robots more than humans to manage finance.”

Around 85% of survey respondents “believe robots will replace finance professionals and 46% believe it will happen in the next five years.” Around 85% of business leaders “want help from robots for finance-related tasks.”

People are also “rethinking the role and focus of corporate finance teams and personal financial advisors,” according to the research.

Other notable results from the survey include:

Consumers want personal financial advisors “to provide guidance on major purchasing decisions such as buying a house (45%); buying a car (41%); and planning for retirement (38 percent).”
60% of consumers “say the pandemic has changed the way they buy goods and services.”
72% of consumers “say the events of 2020 have changed how they feel about handling cash, with people feeling anxious (26%); fearful (23%); and dirty (19%). More than a quarter (29%) of consumers now say that cash-only is a deal-breaker for doing business”.
Businesses have been “quick to respond as 69% of business leaders have invested in digital payment capabilities and 64% have created new forms of customer engagement or changed their business models in response to COVID-19”.
51% of organizations are “already using AI to manage financial processes, compared with 27% of consumers”.
87% of business leaders “say organizations that don’t rethink financial processes face risks, including falling behind competitors (44%); more stressed workers (36%); inaccurate reporting (36%); and reduced employee productivity (35%)”.

As noted in the update shared with CI, managing finances can be challenging during the best of times, and the financial “uncertainty” due to the COVID-19 pandemic has further exacerbated financial challenges at home and at work, according to Farnoosh Torabi, personal finance expert and host of the So Money podcast.

Torabi added:

“Robots are well-positioned to assist – they are great with numbers and don’t have the same emotional connection with money. This doesn’t mean finance professionals are going away or being replaced entirely, but the research suggests they should focus on developing additional soft skills as their role evolves.”

Research Methodology

Research findings are “based on a survey conducted by Savanta, Inc. between November 10 – December 8, 2020 with 9,001 global respondents from 14 countries (United States, United Kingdom, Germany, Netherlands, France, China, India, Australia, Brazil, Japan, United Arab Emirates, Singapore, Mexico and Saudi Arabia)”. The survey “explored attitudes and behaviors of consumers and business leaders towards money, finances, budgets, and the role and expectations of artificial intelligence (AI) and robots in financial tasks and management.”

Juergen Lindner, SVP, Global Marketing, Oracle, remarked:

“Financial processes in our personal and professional worlds have become increasingly digital for many years and the events of 2020 have accelerated that trend. Digital is the new normal and technologies such as artificial intelligence and chatbots play a vital role in managing finance. Our research indicates that consumers trust these technologies to accelerate their financial well-being over personal financial advisors and business leaders see this trend reshaping the role of corporate finance professionals. Organizations that don’t embrace these changes risk falling behind their peers and competitors; hurting employee productivity, morale and well-being; and struggling to attract the next generation of AI-empowered finance talent.”

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Jan 30 2021

European VC Markets Performed Reasonably Well as they Secured $40B Last Year, Supported by Steady Fintech Sector Growth: Report

The European venture capital markets managed to perform reasonably well last year, even though there was a significant slowdown in funding or financing following the COVID-19 outbreak (during Q1 2020 and also leading into Q2 2020), Crunchbase data confirms.

Funding provided to European startups during 2020 totaled around $40 billion, down only 4% from 2019 at $41.8 billion. This notably marks the second-highest annual funding total for European startups since the past 10 years.

The amount of funding really began to pick up during the final quarter of last year, which is often a relatively slower funding period as investors are focused on winding down operations. But this time, venture capital allocated to European startups totaled around $11.8 billion — which is reportedly the best-performing quarter since the past couple years. European late-stage VC funding has also peaked during Q4 2020.

VC funding acquired by Europe-based startups accounted for around 13% of total global funding last year. Europe and the US were able to gain a significant share during the last few years as funding in China has declined considerably over the same time period. But it must be noted that this 13% figure doesn’t include Europe-based startups with head offices now in the United States but with operations and development teams still in their home countries.

Seed funding provided to early-state European firms was roughly about $1 billion per quarter since the start of 2019, according to a report compiled by Insurtech Forum. During 2020, there were over 3,500 “unique” firms that secured funding at the seed stage (totaling approximately $3.7 billion, which is significantly lower than the $4 billion raised in 2019). But the report also noted that these funding amounts will most likely increase as more seed fundings are recorded retroactively at the end of every quarter.

As covered recently, this month (January 2021) has already been huge in terms of Fintech fundraising, with notably 13 mega-rounds (now 14 with NuBank) valued at $100 million or more having been completed to start off the new year.

These companies have acquired approximately $2.746 billion in capital. This figure does not even include investment rounds valued at less than $100 million, however, there were many others that also acquired significant investments as part of their Series A and Series B rounds.

These substantial Fintech investments appear to have been building off the momentum from 2020 when venture capital-funded Fintechs acquired $41.7 billion in capital, which is notably the second-largest yearly total of the past 10 years, Pitchbook data confirms.

As reported recently, Fintech firms in Indonesia attracted substantial funding throughout 2020 along with digital commerce and software-as-a-service or SaaS platforms.

North American and European Fintech firms attracted considerable funding as well in 2020 but the number of deals declined, according to report from last month.

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Dec 30 2020

Paysend Welcomes More Than 150,000 New U.S. Customers in the Past Three Months Alone

Paysend, a UK-based global payments platform, announced on Tuesday more than 150,000 net new U.S.-based customers have used its platform during the last three months alone to send digital money transfers across borders. Paysend reported that following its stateside launch in September amidst the pandemic, it experienced a 25% increase in U.S. outbound transfer activity between September and October.

“This rapid growth occurred as American residents, including large populations of immigrants, expatriates and foreign exchange students, adopted the platform to securely transfer funds to international accounts located across more than 70 countries in minutes — without visiting a physical bank location.”

Speaking about the milestone, Matt Montes, Paysend’s U.S.-based General Manager, stated:

“Paysend’s platform fills the void that has long existed in America for a low-cost, convenient method to send money abroad, without charging the erroneous fees that have become synonymous with traditional transfer methods. As a result of our record new user adoption rate, we’ve grown Paysend’s U.S.-based team, and we will announce strategic partnerships with global payment partners in 2021 to offer even more features that enable American citizens and visitors alike to connect with loved ones via safe and secure international money transfers.”

Paysend CEO, Ronald Millar, added:

“During times of uncertainty, individuals in emerging economies are even more reliant on fast and affordable cross-border payments from those in the United States. Digital transfers offer a much-needed alternative to traditional money exchange methods. Since the start of the global pandemic, more than one million new global users have joined Paysend’s platform to send money to friends and family around the world. Our successful entry into the U.S. market in Q3 is certainly helping to fuel our global momentum.”

Founded in 2017, Paysend is the global fintech company and payments disruptor based in the UK. It is on a mission to change how money is moved around the world.

“We are the next generation money transfer platform allowing you to send funds from card to card from 45 to over 80 countries.”

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